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WTH does that mean?! Mortgage accronyms and their meaning.

· MORTGAGE

If you get easily confused when reading a Twitter feed then your head might spin if you sat behind my desk for a day! Below is a "quick list" of mortgage lingo and wth they mean! LOL!

APR-- Annual Percentage Rate. The APR calculates the annual percentage rate you would pay on the loan once the specific costs (PFC’s) of getting the loan are factored in.

AMC--Appraisal Management Companies- is an independent entity through which mortgage lenders order residential real estate valuation services (appraisals) for properties. The use of AMC’s rose in 2008 with, what is now referred to as, Appraiser Independence. The regulation has a ton of rules but basically AMC’s keep lenders safe by offering to be a middle man between the lender and the appraiser ensuring no influence of making value. Not every lender uses AMC’s and I have my own opinion about them but that’s another blog post.

ARM-- Adjustable Rate Mortgage. An Adjustable rate mortgage is a mortgage that will have a fixed rate for a set period of time and then the rate is adjusted. The rate will normally be adjusted once or twice a year.

ATR--Ability To Repay- The ability-to-repay rule requires most mortgage lenders to make a reasonable and good faith determination that you are able to pay back the loan. Under the rule, lenders must generally find out, consider, and document a borrower’s income, assets, employment, credit history and monthly expenses. Lenders cannot just use an introductory or “teaser” rate to figure out if a borrower can repay a loan.

AVM-- Automated Valuation Model-- It does not involve a human inspection of the property. It is an automated program that estimates a property's value based on an analysis of property characteristics against public record data

bps-- basis points- one hundredth of one percent, used chiefly in expressing differences of interest rates. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form.

CLTV-- Combined Loan-To-Value—is a ratio which is a calculation used to determine the total percentage of a homeowner's property that is encumbered by liens. If you go to buy a house with a sales price of $100,000 and get a first lien of $80,000 and a second lien of $10,000 your CLTV would be 90%- Total Mortgages/Lessor of Sales Price or Appraised Value= Expressed as a %.

Condo-- unit in a condominium project-- is one of a group of housing units where each homeowner owns their individual unit space, and all the dwellings share ownership of common use areas. All the land in the condominium project is owned in common by all the homeowners.

CU-- Collateral Underwriter- CU performs an automated risk assessment on appraisals geared toward Fannie Mae and returns a risk score, flags, and messages to the submitting lender. CU will provide a risk score for the appraisal of 1-5 (1 being the lowest risk and 5 being the highest).It will analyze comparable sales selected by the appraiser and recommend alternatives as well as compare adjustments the appraiser has given with what other appraisers have done in the same area (Fannie Mae has been mining data from over 12 million appraisals since 2011, so they definitely have some data at their disposal). The CU tool does not read any of the commentary by the appraiser, which can be key to understanding comp selection, adjustments, and the final value.

DO-- Desktop Originator is an automated tool that assists lenders in the underwriting of conforming mortgage loans. Automated Underwriting to Fannie’s guidelines DO is used by mortgage brokers and correspondent lenders

DU Desktop Underwriter is an automated tool that assists lenders in the underwriting of conforming mortgage loans. DU is used by direct sellers to Fannie Mae. It’s the same thing as DO basically. Automated underwriting to Fannie’s guidelines

DTI--Debt-to-income ratio- the amount of debt you have as compared to your overall (gross) income. In mortgage lending we have the top ratio which is the proposed total housing payment divided by gross qualifying income. We also have the bottom ratio which is proposed total housing payment PLUS alllll monthly debt payments (min payments on credit cards, auto loans, student loans-yes, we count an estimated payment even if deferred, all other loan payments, etc.) divided by gross qualifying income. We like to see the bottom ratio be 45% or less.

ECOA-- Equal Credit Opportunity Act. A law in the U.S. that makes it illegal for any creditor to discriminate against any applicant on the basis of race, religion, national origin, sex, etc. for residential mortgages.

FEMA --Federal Emergency Management Agency- FEMA determines the flood zones as well as issues flood insurance policies. Clearly, they do more but as far as mortgage lending goes, this is what they do for us.

FICO-- Fair Isaac Corporation. The company that created the industry standard credit scores used by almost all lenders. The FICO score is a numeric summary of the information in your credit reports that represents your potential credit risk. NOTE this is NOT the same score you get if viewing your free score. Those use a different scoring model.

FHFA-- Federal Housing Finance Agency- A U.S. government agency created by the Housing and Economic Recovery Act of 2008 that regulates the secondary mortgage market by overseeing the activities of Fannie Mae, Freddie Mac and the 12 federal home loan banks. The new organization's goals include increasing affordable housing, conserving the assets and property of Fannie Mae and Freddie Mac, and stabilizing a turbulent U.S. economy.

FNMA -Federal National Mortgage Assc aka Fannie Mae- is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression and its purpose is to expand the secondary mortgage market by securitizingmortgages in the form of mortgage-backed securities allowing lenders to reinvest their assets into more lending. Its brother organization is the Federal Home Loan Mortgage Corporation (FHLMC), better known as Freddie Mac.

FHLMC -Federal Home Loan Mortgage Corporation aka Freddie Mac- is a public government-sponsored enterprise (GSE). The FHLMC was created in 1970 to expand the secondary market for mortgages in the US. Along with the Federal National Mortgage Association (Fannie Mae), Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage lending and increases the money available for new home purchases.

GPM-- Graduated Payment Mortgage. This is a type of mortgage on which the payment starts low and rises over time.

GSE-- Government-Sponsored Enterprise- A government-sponsored enterprise (GSE) consists of privately held corporations with public purposes created by the U.S. Congress to reduce the cost of credit for certain borrowing sectors of the economy. Government-sponsored enterprises are quasi-governmental entities that were established to enhance the flow of credit to specific sectors of the American economy. These agencies, though privately-held, provide public financial services.
 

HARP-- Home Affordable Refinance Program. HARP is a refinance program that allows eligible borrowers, with little to no equity in their homes, to take advantage of low interest rates and other refinancing benefits.

HCLTV-- Home Equity Combined Loan-To-Value This is determined by dividing the sum of the items listed below by the lesser of the sales price or appraised value of the property.

  • the original loan amount of the first mortgage,
  • the full amount of any HELOCs (whether or not funds have been drawn), and
  • the unpaid principal balance (UPB) of all closed-end subordinate financing.

HELOC-- Home Equity Line of Credit- A HELOC is a home equity line of credit. It is a loan, using your home as collateral, that lets you borrow up to a certain amount, rather than a set dollar amount

HFA-- Housing Finance Agency-- are state-chartered authorities established to help meet the affordable housing needs of the residents of their states.

HOA -- HomeOwners’ Association- is an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties within its jurisdiction. Those who purchase property within an HOA's jurisdiction automatically become members and are required to pay dues, known as HOA fees.

HOEPA-- Home Ownership and Equity Protection Act of 1994- was enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive practices in refinances and closed-end home equity loans with high interest rates or high fees.

HUD-- Department of Housing and Urban Development- administers programs that provide housing and community development assistance. The Department also works to ensure fair and equal housing opportunity for all.

IRRRL: VA Interest Rate Reduction Refinance Loan. This refinance loan allows you to lower your interest rate on an existing VA home loan.

IRS - Internal Revenue Service—Enuf said.

LIBOR-- London Interbank Offered Rate- is a benchmark rate, which some of the world's leading banks charge each other for short-term loans. LIBOR rates are commonly used as the index for adjustable rate mortgages (ARM)....for now. To be continued...

LLC--Limited Liability Company- is a corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities.

LLPA-- Loan-Level Price Adjustment- is a risk-based fee assessed to mortgage borrowers using a conventional mortgage. Loan-level pricing adjustments vary by borrower, based on loan traits such as loan-to-value (LTV), credit score, occupancy type, and number of units in a home. Borrowers often pay LLPAs in the form of higher mortgage rates. Here is a link to my blog post on LLPAs https://www.stephaniedonnell.com/blog/online-rates-vs-reality 

LOS-- Loan Origination System- This is just the system the lenders use for their company to originate and process the loans. There are tons of LOS’ available for the lenders to choose from.

LOX – LOX stands for letters of explanation. These are often required if your lender wants something explained further. For example, perhaps you’ve had a significant income change, late payments or large deposits into your bank account. These letters allow you to explain circumstances to the lender, and help you qualify for the loan.

LP- Loan Prospector- Now called Loan Product Advisor (LPA) but everyone will forever call it LP. This is Freddie Mac's automated underwriting system. Same concept as DU/DO but for Freddie Mac.

LTV-- Loan-To-Value- is a ratio calculated as the amount of the mortgage lien divided by the lessor of sales price or appraised value of the property, expressed as a percentage. Example- $90,000 loan amount and $100,000 appraised value= 90% LTV.

MBS-- Mortgage-Backed Security- is a type of asset-backed security that is secured by a mortgage or collection of mortgages. The mortgages are sold to a group of individuals (a government agency or investment bank) that securitizes, or packages, the loans together into a security that investors can buy.

MERS-- Mortgage Electronic Registration Systems, Inc.-- identify the servicer associated with a mortgage loan registered on the. MERS® System. On the mortgage lending side, we also use this as a fraud check to ensure the borrower does not have any undisclosed mortgage debt.

MI-- Mortgage Insurance- Lenders and investors typically require mortgage insurance for loans with down payments of less than 20%. Private mortgage insurance (private MI) is a financial guaranty business in which an insurer assumes a portion of a lender's risk in making a mortgage loan. provides lenders a financial guaranty should a loan go into foreclosure.

MSA- Metropolitan Statistical Area- Data on “rural areas, “Indian areas” and “high opportunity areas” as defined by the Duty to Serve Regulation. The Duty to Serve regulation governs the statutory obligation of Fannie Mae and Freddie Mac to serve very low-, low-, and moderate-income families in three underserved markets: manufactured housing, affordable housing preservation, and rural housing. MSAs are defined by the Office of Management and Budget (OMB) and used by the Census Bureau and other federal government agencies for statistical purposes

MUD-- Municipal Utility District- is a political subdivision of the State of Texas authorized by the Texas Commission of Environmental Quality (TCEQ) to provide water, sewage, drainage and other utility-related services within the MUD boundaries. Municipal Utility Districts are funded through bonds. Homeowners then pay off those bonds through MUD tax. As the debt decreases, MUD taxes may also decrease over time.

NMLS- Nationwide Multistate Licensing System & Registry- The NMLS Unique Identifier is the number permanently assigned by the Nationwide Mortgage Licensing System & Registry (NMLS) for each company, branch, and individual loan officers.

NPI--Nonpublic personal information- The Privacy Rule protects a consumer's "nonpublic personal information" (NPI). NPI is any "personally identifiable financial information" that a financial institution collects about an individual in connection with providing a financial product or service, unless that information is otherwise "publicly available." As a mortgage lender, we cannot release ANY NPI to any party other than the borrower. This includes the Realtor. Some examples of NPA are account numbers, loan payoff amounts, borrower’s debt profile, insurance, tax information, etc.

P&I-- Principal and Interest- includes the interest charges for the period plus an amount applied to amortization of the principal balance

PERS-- Project Eligibility Review Service- is a review method available to lenders to submit condo project information to Fannie Mae for eligibility review. The use of PERS is required for the review of certain projects; not all.

PFC- Prepaid Finance Charge are certain fees or charges (closing costs) you are required to pay at closing that cannot be refunded and are calculated into your Annual Percentage Rate. Some examples of these fees would be but not limited to: Points- both discount points and origination points. 1 point equals 1% of the loan amount. Pre-paid interest- The interest paid from the date the loan closes to the end of the month. Admin Fee, Processing fee, Underwriting fee, Document Preparation fee, Escrow/Settlement fee.

PITI: Principle, Interest, Taxes and Insurance. These are the four main components of your monthly mortgage payment. Principal is the loan amount. Interest is the rate at which the finance charges you pay for borrowing is calculated. Taxes are the real estate property taxes for which you are responsible, and insurance is the homeowner’s insurance that your lender requires you to have.

PIW-- Property Inspection Waiver- is an offering thru the Automated Underwriting systems that waive the appraisal for eligible transactions. We do not see PIW’s much.

PUD-- planned unit development - A PUD includes ownership of a “lot,” with common areas either owned by a homeowner’s association (HOA) or collectively by all invested parties. If you buy a home within a planned unit development, you’ll have to pay homeowner’s association dues.

POC – If you see this acronym on your closing documents, it means this fee has already been “paid outside of closing.”

RD-- Rural Development- USDA Rural Development is a loan program offered thru US Dept of Agriculture which assists in financing rural properties. The program offers 0% down but has restrictions.

REO-- real estate owned- This has two meanings in our day-to-day business. The most common is when we refer to the REO section of the loan application which lists all other real estate the borrower owns. Another use for REO is referencing bank owned property being sold (foreclosure).

RHS-- Rural Housing Service- is an agency of the United States Department of Agriculture (USDA)

QM- Qualified Mortgage- is a category of loans that have certain, more stable features that help make it more likely that you'll be able to afford your loan. ... If a lender loans you a Qualified Mortgage it means the lender met certain requirements and it's assumed that the lender followed the ability-to-repay rule. Link for features of QM https://www.aba.com/Advocacy/Issues/Documents/CFPB-QM-1P.pdf

TALCB- Texas Appraisal Licensing and Certification Board- oversee real estate brokerage, real property appraisals, inspections, home warranties, and timeshare opportunities. The agency also provides education and licensing services, as well as regulation and enforcement of state and federal laws and requirements that govern real property appraisals.

TILA-- Truth in Lending Act- of 1968 is United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.

TREC- Texas Real Estate Commission-- licenses and regulates real estate brokers, sales agents, inspectors, and other related professionals.

USPAP-- Uniform Standards of Professional Appraisal Practice- is the generally recognized ethical and performance standards for the appraisal profession in the United States. Compliance is required for state-licensed and state-certified appraisers involved in federally-related (which are Conventional and Government) real estate transactions. Just a side note that appraisers must comply with their USPAP as well as guideline requirements set by the Agencies (Fannie, Freddie, FHA, VA, etc.)

VA-- Department of Veterans Affairs. home-mortgage option available to United States Veterans, Service Members and not remarried spouses. VA Loans are issued by qualified lenders and guaranteed by the U.S. Department of Veterans Affairs (VA). They offer 0% down payments.

VOE – Verification of Employment. The lender will need to verify your employment with your employer. This can be a written or a verbal verification but in either case, it’s a VOE.

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